Current Liabilities and Payroll

Vocabulary

contingent liability

potential liability arising from a past event or transaction. Its outcome is dependent on a future event or decision, such as the settlement of a pending lawsuit.

creditor

any entity entitled to receive payment

current liability

amount owed by a business expected to be paid within one year or during the operating cycle, whichever is longer

current portion of long-term debt

portion of noncurrent debt that is due within one year of the balance sheet date and is reported under current liabilities on the balance sheet

Federal Insurance Contributions Act (FICA)

law requiring each employee to pay into Medicare and Social Security through employee payroll deductions called FICA taxes. Employers must pay matching FICA taxes through the payroll process.

Federal Unemployment Tax Act (FUTA)

law under which employers must pay unemployment taxes as part of payroll taxes

gross earnings

total amount an employee earns before deductions or withholdings, whether from a salary or wages

net pay

gross earnings less total deductions

note payable

form of borrowed funds or loan from a financial institution such as a bank

payroll liability

wages, salaries, and other compensation amounts owed to employees, government agencies, and other organizations

payroll register

record of every employee's gross earnings, deductions, and net pay

payroll tax

employee and employer tax related to payroll. It may include federal or state income taxes, Social Security taxes, and unemployment taxes.